Er³⁺ doped Y₂O₃ nanoparticles were synthesized by enzymatic and polymer-assisted homogeneous co-precipitation methods. Resultant particle size is about 30–40 nm with narrow size distribution whereas the particle size is smaller than those acquired by conventional homogeneous and alkali precipitation methods. The particles shows bright green (550 nm) and red (660 nm) upconversion (UC) as well as near infrared (NIR) fluorescence (1550 nm) under 980 nm excitation. Bioimaging of M1 cells using the nanoparticles were successfully attempted. It is observed that 0.5 mg/ml of nanoparticles is the nominal concentration for bioimaging of M1 cells under the physiological conditions. The cellular uptake of nanoparticles is evidenced from bright field, UC and NIR fluorescence images of live M1 cells. Our studies suggest that lower concentration of nanoparticles is sufficient for imaging when the particles are taken in the M1 cells and also the concentration can keep the cells alive. Further it was demonstrated that under the physiological conditions, Y₂O₃ nanoparticles emit UC and NIR fluorescence in M1 cells even after the surface modification with PEG-b-PAAc polymer. Moreover, surface modified nanoparticles shows lower toxic effect in M1 cells while compare to bare nanoparticles.